Personal reasons
You need to learn investing sooner
or later in life. You need to take risk. Compare the returns of the following
assets: cash, CDs, treasury bills, bonds, real estate and stocks. We start with
the risk-free investments and end with the riskiest. It turns out the average
returns to be in the opposite order. Cash and CDs are not risk-free as
inflation eats our profits. For example, the real return is negative for the2%
return in a CD and a 3% inflation rate is 3% and you have to pay taxes for the
‘returns’. Our capitalist system punishes us for not taking risk.
They are two kinds of risk: blind
risk and calculated risk. If you buy a stock due to a recommendation from TV or
tip, most likely you are taking a blind risk. It would be the same in buying a
house in a decaying neighborhood. When you buy stocks with a proven strategy
with exit strategy, you are taking a calculated risk.
With so many frauds and poor
management, do not trust anyone in investing. If you buy a market ETF and use
my simple market timing, you should have beaten the market by a wide margin
from 2000 to 2017 (as of this writing). The average hedge fund return is
TERRIBLE if you include the closed ones and their hefty fees.
My personal reasons
After college, my bank account
was negative but I was glad I did not have any loans. So, saving is always
important to me.
I have been investing since my
first job after college. I had been busy in my job and family and did not pay a
lot of intention to investing. The market has been rising steadily even after
the market plunges. Hence, it is no brainer in making money in the market. I
started rotating sectors in 2000 since my job did not allow me to trade stocks
without a lot of restrictions. It was doing great.
I moved all my risky sectors to
‘traditional’ sectors in April, 2000 (cash could be far better). I moved back
to value stocks in 2003. I did missed 2007 due to my false security from the
good profits in energy stocks. However, I moved back to stocks in March, 2009.
As a retiree I was very conservative today and missed part of the bull market
from 2010 to today.
In my early retirement, I read
hundreds of investing books and conducted thousands of strategy simulations.
Some strategies and/or metrics used to work previously do not work in today’s
market.
I believe “buy and hold” is dead
after 2000. My books outline how we adapt the strategies for today and future
markets that are always changing. My children are not interested in investing
and hence I do not withhold any secrets as most other book authors do. Do you
blame them?
Social reasons
“Counting money (pennies in my
case) with the filthy and smelly hands dripping with blood (hopefully others’)
from the market”.
It is just a joke and investors
serve an important role for the society. With my frugal life style, I do not
have to invest and/or write books. It is my hobby and fun to kill time. I can
still contribute to the society in my life after retirement.
If we do not invest, where can
the startup obtain financing? All the
life-saving drugs need heavy financing. Many investments are not risk-free.
Being social conscious, I try to stay away from sin stocks such as tobacco
companies. There are many social funds also promote their agenda that are
available to us.
Investors can punish the mismanaged
companies by selling their stocks. Many times they are good as a warning to the
management.
Traders can take advantage of the
market. It is cruel to talk about making money in natural disasters such as
hurricanes. Some sectors such as construction would benefit. If you feel
guilty, just donate some of the profit to the victims. Donating appreciated
stocks as of this writing gets the biggest bang for the money.
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